Research on Systemic Risk Measurement Based on Factor Analysis

In this paper, related indicators in the stock market, bond market, money market, foreign exchange market, financial institution, and macroeconomic indicators are selected. Using China's macro and microeconomic data from 2007 to 2020, it adopts the factor analysis method to construct financial stress index to measure systemic risk. The empirical analysis found that Chinese Financial Stress Index has shown changes in phases. After four large peak fluctuations, the trend has fallen in the low-risk range in recent years. The Chinese Financial Stress Index constructed based on the factor analysis method can better describe China's systemic risk status in recent years and has a strong reference significance for the identification and prevention of systemic risks.